Debt restructuring of Transportadora de Gas del Sur

Transportadora de Gas del Sur S.A (?TGS?), Argentina?s leading transporter of natural gas and one of the largest marketers of natural gas liquids, successfully closed today the restructuring of substantially all of its financial indebtedness for an aggregate amount of approximately US$ 1,018 million. This is the largest private debt restructuring closed in Argentina to date.

Robert Risoleo from Sullivan & Cromwell commented: ?Key features of the restructuring offer, such as accelerated cash payments related to the level of consent and the ability to avoid the courts entirely at a very high consent level, helped to provide a foundation for the extraordinarily successful conclusion to this process.?

TGS indebtedness included: (a) (i) the Series No. 1 US$150 million Floating Rate Notes due 2003, (ii) the Series No. 2 US$150 million 10.375% Notes due 2003, (iii) the Series No. 3 US$100 million Floating Rate Notes originally due 2002 and extended until 2003 and (iv) a US$200 million Floating Rate Note due 2006; (b) other financial indebtedness comprised of US$326 million under two loan agreements with the Inter-American Development Bank (IDB), and (c) US$25.3 million of pre-export financing loans, approximately US$18.9 million of import financing loans and US$48.5 million of other short term financing. As part of the restructuring process, Peso loans due for a total principal amount of US$9.2 million were repaid.

Ricardo W. Beller, of Marval, O´Farrell & Mairal commented: ?The restructuring proposal included a novel feature which we baptized the ?In-APE Exchange.? Under this alternative TGS would have been able to both complete the exchange immediately after finalizing the consent period and file an Acuerdo Preventivo Extrajudicial or APE to make the restructuring agreement terms effective against holdouts. However, as TGS reached a record breaking high consent level of 99.76%, a direct exchange was implemented without requiring the filing of an APE.?

Under the terms of the proposed restructuring, (i) if the consenting creditors represented at least 96% in aggregate principal amount of the existing debt obligations, the Company would enter into a direct exchange, (ii) if the consenting creditors represented less than 96%, but at least 85% in aggregate principal amount of the existing debt obligations the Company would file the restructuring agreement with the Argentine court under an Acuerdo Preventivo Extrajudicial procedure (APE) and implement an In-APE Exchange which consisted of implementing the exchange immediately after filing with the court and prior to the court approval, and (iii) if the consenting creditors represented less than 85% but the majorities for filing an APE were reached (two thirds of outstanding debt plus more than 50% of the creditors on a headcount basis) then the APE would be filed with the court and the exchange would not be implemented until final endorsement. The proposal was highly successful and was accepted by approximately 99.76% of the outstanding debt obligations as of November 12, 2004. The direct exchange (option (i) above) was completed by December 15, 2004.

Consenting creditors received as consideration for the exchange or cancellation of their existing debt obligations: (a) a cash payment of past default interest for a total amount of approximately US$130 million, (b) a cash payment for a total amount of approximately US$110 million for the cancellation of 11% in principal amount of the existing debt obligations, and (c) new debt obligations in exchange for or in respect of the cancellation of, as the case may be, the remaining 89% in principal amount of their existing debt obligations, as follows: (i) 52% of the aggregate principal amount of the new debt obligations shall have the terms corresponding to Tranche A, with a final maturity of 6 years and an increasing interest rate from 5.30% in the first year to 7.50% in the sixth year; and (ii) 48% of the aggregate principal amount of the new debt obligations shall have the terms corresponding to Tranche B, with a final maturity of 9 years and a regular increasing interest rate from 7.00% in the first year to 10.00% in the ninth year. Consenting creditors were also required to chose between two different additional interest options for the Tranche B debt obligations, or a combination of both: (a) Tranche B-A which offered an additional interest calculated on the basis of the consolidated adjusted EBITDA of the Company, or (b) Tranche B-B which offered an additional interest of 0.60% on Year 3 which increased annually by 5bps to 0.90% on Year 9. Almost all creditors chose to receive Tranche B-A.

Rohit Chaudry from Chadbourne & Parke said: ?This restructuring required the parties to creatively address a number of complex Argentine and NY law issues in the context of a challenging economic and political environment in Argentina. It is gratifying to see that this creativity paid off and we received near unanimous consent from a diverse group of creditors.?

Roberto Lizondo from Bruchou, Fernandez Madero, Lombardi & Mitrani said: ?Although negotiations to reach a deal were long and arduous and the structure devised was complex, the goodwill shown by all the parties involved and the hard work bore their fruits in the almost unanimous consent obtained by the Company.?

In the U.S.A. TGS was advised by a Washington, D.C.-based team from Sullivan & Cromwell LLP, including partner Robert Risoleo and associates Veronique Fine, Christine Brennan, Kirsten McGarvey, Scott Ashton, Christopher Campbell and Sean Gallagher. New York based partner Jeffrey Hochberg and associate Sam Lichtman provided U.S. tax advice.

TGS was advised in Argentina by its internal counsel Enrique Prini Estebecorena and by Marval, O?Farrell & Mairal, through partners Ricardo W. Beller, Martín Campbell and Luciano Ojea Quintana and associates Hernán Slemenson (of the firm?s New York office) Mariano Gramajo, Facundo Recondo and Lara Rodriguez Peña.

In the U.S.A the Steering Committee was advised by Chadbourne & Parke LLP, through partner Rohit Chaudhry and associate James Scarrow (of the Washington Office) and Latin America counsel Carlos Albarracín (of the New York Office). In addition partners Claude Serfilippi (of the London office) and Alejandro San Miguel (of the New York office) provided support on securities law issues.

The Steering Committee was advised in Argentina by Bruchou, Fernández Madero, Lombardi & Mitrani, through a team led by partner Enrique Bruchou and associates Roberto Lizondo, Inés Moronta, Ezequiel Díaz Cordero, José Manuel Pazos, Alejandro Perelsztein and María Rita Martinengo. In addition, partner Carlos Rotman provided support on insolvency law issues.